Stories written by Jo Ciavaglia, award-winning multimedia newspaper reporter at the Bucks County Courier Times in Bucks County, a suburb of Philadelphia, Pa.
For more information about Jo, check out her Linked-in profile, as well as her Facebook fan page, Instagram and Google+
Sunday, September 4, 2016
What's behind the legal battle over Upper Makefield's Hickory Run horse farm
Penny Silcox (left) & her mother Delores Silcox
August 31, 2016
As business partnerships go, the one between the owners of an Upper Makefield horse farm is about as smooth as a bale of hay.
This much Patricia “Penny” Silcox and Michael and Michelle Gara agree on: Silcox is a better horsewoman than a businesswoman; Hickory Run Farm, which Silcox owned and ran for 30 years, has a recent history of financial problems, including delinquent taxes; last year, Silcox borrowed $309,273.34 from the Garas, using the farm as collateral; and the Garas now hold the majority ownership of the farm.
Michelle & Michael Gara
The list of what they dispute is much longer and more complicated. The dispute has evolved into a legal battle in Bucks County Court, where the Garas sued Silcox in July.
Key among the concerns for Silcox is the ownership of the Pineville Road farm. Through her lawyer, Daniel Sweetser, Silcox said she made the Garas partners because Michael Gara told her that was the only way he could get a tax benefit from lending her money. Sweetser said Gara told Silcox he'd reduce her loan amount by the amount of his tax credit, which Sweetser said didn't happen.
Hundreds of pages of new court documents, filed earlier this month by the Garas, boil down to this: They want a judge to force Silcox to fulfill what they say was a verbal promise to transfer the assets of the horse farm, including 36 acres appraised at $1.5 million, into a new company in which the Garas would have a 90-percent ownership and Silcox would own 10 percent. The Garas' lawyer estimates the 10-percent ownership is worth a maximum of $150,000.
The Garas also seek a court injunction to bar Silcox from the farm and from conducting business on its behalf. In July, they received a temporary restraining order barring Silcox from conducting farm business. A few weeks later, a judge postponed a contempt hearing charging Silcox with violating the restraining order. She retains a 25-percent ownership of the farm, but the Garas have removed her from its board of directors and terminated her employment.
“The Garas never wanted to be in litigation or have any trouble whatsoever,” according to their amended lawsuit, which was filed Aug. 4. “They could have bought any other horse farm and not had any of the angst and aggravation that has resulted from defendant Penny and her actions. Simply put, this matter is a lesson in the old adage that no good deed goes unpunished.”
Sweetser contends his client never planned to sell her farm or even partner with the Garas. He said Silcox borrowed $309,273 from the Garas, using the horse farm as collateral. But, he added, Silcox didn't sign a second note borrowing an additional $889,706 from the Garas, as the lawsuit claims. He also said Silcox didn't understand that she gave the Garas 75 percent ownership of the farm when she made them partners on Dec. 31, 2015.
“She never intended to give them any interest in the property,” Sweetser said. “There is not one document, and I’ve been through thousands of documents, and there is not one document I am aware of that talks about that at all.”
Michael Gara, who works as a financial adviser, and his wife became acquainted with the 64-year-old Silcox, who is well known in the local equestrian community, in spring 2013, according to their attorney. The couple started boarding horses at her farm and hired her to give their daughter riding lessons in 2014. Hickory Run Farm is about 1 mile from the couple’s Pineville Road home.
The couple allege that early last year, after Silcox learned they were looking to buy a horse farm, she “manipulated” them into investing more than $1 million in what the lawsuit called her failing farm. They said the money was used for improvements and to clear Silcox’s personal and business debts.
Penny Silcox leading a riding lesson
Among the allegations in the Garas' lawsuit, which seeks damages in excess of $2 million:
In late 2014 or early 2015, Michael Gara paid $27,508 to enclose a metal arena, which allowed Silcox to board horses in the winter. Gara alleges Silcox offered him a lien on a farm-owned horse to assure repayment but didn't follow through.
In May 2015, the Garas, Silcox and attorney Dawn Burke, who represented the Garas, met to consolidate the operations and assets of Hickory Run Farm and RPSC Inc., which owns the land on which the horse farm is located. Silcox and her brother own RPSC. Under terms of the verbal agreement, the assets would be transferred into a new company, the Newtown Equestrian Center, before the end of the first quarter of 2016. The transfer hasn't happened and Burke didn't answer multiple requests for comment.
The $309,273.34 loan the Garas made to Silcox was to repay the couple for money they had already advanced Silcox for the farm and her debts.
Silcox refused to follow financial and billing protocols the Garas implemented, “misappropriated” company money and sold horses without their authorization.
Sweetser contends his client agreed to give the Garas credit toward training lessons and boarding to repay the $27,508 to enclose the barn. He said the Garas were "well aware" of similar barter arrangements Silcox had with other horse owners.
Bucks County and state tax records show multiple liens for unpaid taxes were placed against Hickory Run Farm over the past decade.
The farm’s 2012 property taxes were paid in full as of December 2014, records show. The 2013 and 2014 tax bills — totaling $54,899.32 — remained unpaid until April of this year, Bucks County Tax Claims Bureau records show. The property was advertised for tax sale in 2011, 2012, 2014 and 2015, but the sales were called off after the taxes were paid, tax claims bureau Director Marguerite Genesio said.
When they first started loaning Silcox money, the Garas knew about the tax liens and other debts, according to attorney Neal Jacobs, who represents the couple. However, Jacobs said financial information Silcox provided the Garas convinced the couple the farm could break even if what the suit called "normal" business practices were followed.
Jacobs acknowledged there was only a verbal agreement about restructuring the farm's ownership but said emails, notes taken by Burke and other documents confirm the deal. Silcox was well aware that, under the deal, the farm would essentially belong to the Garas, and she would remain on the board as a minority shareholder and continue working for the Garas as a trainer, Jacobs added.
“Penny wanted to see the land continue as a horse farm and the Garas liked the opportunity to preserve a local farm,” Jacobs said. “The Garas made clear to Penny that if they agreed to work together, that the Garas would have control over the business operations so that they could implement normal business policies, hire the right people and run the farm the way any good business should be run. Penny would focus on what she loved, horse and rider training. Penny agreed to all of this.”
The Garas at Hickory Run Farm
In recent court filings, Sweetser contends the alleged deal is moot since no formal documentation exists. He also argued the Garas have no ownership claim to the farm's land since RPSC owns it, not Silcox.
As the Garas became more involved in the business, the suit said they realized its financial state was worse than Silcox had told them and that she was using company money for personal expenses.
“Simply put, now that her wrongdoing was being uncovered, Penny is trying to take advantage of the Garas by trying to kick them off the farm after she had milked them of over $1.3 million advanced for the benefit of her and the farm,” according to the lawsuit.
Sweetser denied Silcox misappropriated any money or signed the $889,706 loan agreement with the Garas. “She did not sign it. She did not know about this (second) mortgage. She was not aware of it until after this lawsuit started,” the lawyer said.
He also said she wasn't aware she was no longer the majority owner of the farm until the Garas removed her as its manager in March. "That is when it was clear to her that this was not her company anymore, and that she had given away control," Sweetser said.
Sweetser said Silcox was the one manipulated by the Garas, not the reverse as claimed in the Garas' suit.
“Penny has been a horse farmer her entire life and she is not a business-savvy person in any way. The Garas had to know there was no way, ever, Penny Silcox could ever pay back the $1 million they claim they loaned her,” Sweetser said. “Why are you throwing all this money into this property you don’t own? My personal opinion is they were ultimately interested in taking over the property.”